Wires

UPDATE 1-Turkish Aug current account gap shrinks to 34-month low

Share

(Adds quotes, details, background)

ISTANBUL, Oct 11 (Reuters) - Turkey's August current accountdeficit fell to its lowest level since October 2009, centralbank data showed, as the trade deficit fell due to an economicslowdown and in line with the central bank's targets.

Thursday's data showed the current account deficit fell to$1.18 billion from a revised $4.097 billion a month earlier,below a Reuters poll forecast for a deficit of $1.750 billion.

In the first eight months of the year the deficit, regardedas a major weak point of the Turkish economy, was $36.08billion, 33 percent lower than in the same period of 2011.

The trade deficit, a key driver of the current accountdeficit, dipped 26 percent to $45.2 billion in the first eightmonth of 2012, compared with a year ago.

"(The data) helps affirm the rebalancing view - easing theconcern over the wide current account deficit, large externalfinancing requirement and lira. It also plays into the hands ofthose arguing for a rating upgrade," wrote Timothy Ash, head ofemerging markets research at Standard Bank.

In order to narrow the current account deficit, whichreached 10 percent of output in 2010, and reduce inflation,Turkey's central bank has employed since late 2010 a policy mixbased on daily liquidity injections, an adjustable interest ratecorridor and a low policy rate. The interest rate corridor isthe gap between its overnight lending and borrowing rates.

The current account deficit excluding energy imports paymentfell to $190 million in August, Turkish Finance Minister MehmetSimsek told Reuters on Thursday.

Energy payments are the main driver of Turkey's largeexternal gap as the country imports almost 95 percent of itsenergy needs.

Late in August, credit ratings agency Fitch said it mayraise Turkey's long-term rating to investment grade if it makesprogress towards its potential growth rate, trims inflation toits target rate and narrows the current account gap to a moresustainable level.

Currently, Fitch rates Turkey's creditworthiness at BB+ witha stable outlook, one notch below investment grade. The ratingagency said on Wednesday it will be looking at it credit ratingquite soon.

(Writing by Seltem Iyigun; Editing by Catherine Evans)

((seltem.iyigun@thomsonreuters.com)(+90 212 350 7062)(ReutersMessaging: seltem.iyigun@thomsonreuters.com))

Keywords: TURKEY/CURRENTACCOUNT

Related Tags